'Give me back my two shillings,' yells little Michael to old Mr. Bank. And it sparks a rush to withdraw deposits and bankruptcy in one of the final scenes of Mary Poppins. Is the same happening in banking systems all over the world? A flight of deposits is underway which will trigger a chain of bank insolvencies, therefore a credit crunch which will crush ripe olives like the oil mill, the possibilities and desire to spend of households and businesses and Will it plunge the world economy into a violent recession? Memory runs to the Great Crisis of 2007-2008: are we about to relive the nightmare? Or is the fear exaggerated? After the bankruptcies of some American banks and Credit Suisse in Europe, some investors are wondering who will be next: are their fears justified? Are the signs of credit crunch the prelude for a worse to come? And on which ones conditions of the economy is this restriction working? Are businesses and households indebted just enough, or excessively? Is demand growing or falling? And the occupation? All of this has a first mobile engine: the inflationary dynamics which from temporary turned out to be persistent. Are precipitous rate hikes by central banks finally getting the better of it? Or still not? Should we expect further increases in the cost of money? And what is the difference between the USA, the Euro area, China and Japan? And how is the Italian economy behaving? Stock, currency and bond markets drift between euphoria and fear, worse than a hypomanic patient: or is there some method to their madness?
Here are some of the questions I answer May 2023 economy hands. May is the month of roses, but Fabrizio Galimberti and Luca Paolazzi use some less romantic and primitive tool than tearing the petals off the delicate flower to let the reader know what fate the economic situation has in store for him. The Hands of the economy are a monthly column analyzing the scenarios of economies and markets, born over a third of a century ago. It comes out on FIRSTonline. From tomorrow the fifth issue of the year.
